Ignoring history

The Labour Party, in the lead up to this years’ election, is proposing to cut immigration to help reduce the rapidly rising cost of housing as covered in the Press today and echoed by Phil Twyford on The Nation this morning.

“Labour’s proposal would, in part, see the “points system” under which skilled migrants get entry to New Zealand tweaked in response to net migration flows.”source

So what’s wrong with this policy?

Well there are quite a few problems, but the main one is that doesn’t work.

A few issues
Some of the main issues with this have been identified in todays’ article, for example that the Permanent and Long Term Migration figures being used cover everyone coming in for a year or more (working holidaymakers, students, temporary workers and residents), the vast majority of which would have no intention of buying a house here.

When Labour talks about the “points system” what they mean is a system used in assessing applications under the Skilled Migrant Category (SMC) of New Zealand’s Residence Programme. Points are awarded for age, work experience, qualifications with weighting towards having skilled employment here, especially if this is in an area of long term skill shortage.

There are a number of problems with using the SMC to manage immigration like this such as:

Time lag
It takes on average between 8 and 12 months for an application to go through this process, longer if the person is offshore. Any changes will take a very long time to have an effect.

Numbers
If Labour is planning to use this immigration route to manage immigration by 25,000 to 35,000 there is a problem – only 18,156 visas were granted through this stream last year. A cut could easily see the entire stream canned.

While some people might think that would be a good idea, remember that NZ is in an international battle for skills, trying to attract top migrants here to fill skill gaps. We’re not talking about gaps which can be met by training a few I.T. graduates as the article suggests, we’re talking about attracting qualified professionals who already have years of experience.

I was talking to a Christchurch employer recently who confirmed for every highly skilled foreign worker (usually with 10+ years of experience) they employed they could employ and train at least 2 New Zealanders.

Incentive
So under this policy SMC points will move around in an unpredictable way. Is it an incentive for migrants to have to pay $2,320 to enter a system where the goal posts are continually moving? We need more transparency in immigration, not less.

Ignoring history
Finally there is one major problem with this policy – it doesn’t work. We know it doesn’t work because it hasn’t.

Successive changes were made by government in January 2010, June 2011 and January 2013 to make the SMC points system harder to get through, as a result visas granted have dropped by 32.78% compared to 2008/09. The effect of this has been nearly 32,000 less people allowed residence visas under SMC during the past five years.

What effect has this had on Auckland house prices? Why would further cuts have a different effect?

Interestingly during the same period (25 July 2011) “residential property development” was added by the government to the list of acceptable investment types for wealthy overseas investors to apply for visas here. Just sayin’.